International business practice questions.

Please high light each right answer:

1. In some countries, bribes are commonplace. If a U.S.-based MNC decides to adhere to a strict code of ethics and not pay bribes, its subsidiary may be at a competitive disadvantage in the foreign country.
A) True
B) False

2. Which of the following theories identifies specialization as a reason for international business?
A) Theory of comparative advantage.
B) Imperfect markets theory.
C) Product cycle theory.
D) None of the above

4. Which of the following is an example of direct foreign investment?
A) Exporting to a country
B) Establishing licensing arrangements in a country
C) Purchasing existing companies in a country
D) Investing directly (without brokers) in foreign stocks

5. A high home inflation rate relative to other countries would _______ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would _______ the home country's current account balance, other things equal.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

6. Over time, international trade (exports plus imports) as a percentage of GDP has:
A) Increased for most major countries.
B) Decreased for most major countries.
C) Stayed about constant for most major countries.
D) Increased for about half the major countries and decreased for the others.

7. A weak home currency may not be a perfect solution to correct a balance of trade deficit because:
A) It reduces the prices of imports paid by local companies.
B) It increases the prices of exports by local companies.
C) It prevents international trade transactions from being prearranged.
D) Foreign companies may reduce the prices of their products to stay competitive.

9. Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid ask percentage spread is:
A) about 4.44%.
B) about 4.26%.
C) about 4.03%.
D) about 4.17%.

Solution Preview

Solutions to your study guide questions:

1. In some countries, bribes are commonplace. If a U.S.-based MNC decides to adhere to a strict code of ethics and not pay bribes, its subsidiary may be at a competitive disadvantage in the foreign country.
A) True <--- it would give the foreign company that is allowed to pay bribes an advantage over companies that can't.
B) False

2. Which of the following theories identifies specialization as a reason for international business?
A) Theory of comparative advantage <-- this is the correct theory.
B) Imperfect markets theory
C) Product cycle theory
D) None of the above

3. According to the text, products and services are generally becoming _______ ...

Solution Summary

The solution provides the correct answers with explanations for the international business multiple choice questions listed. All questions are answered.